Emerging innovation policies emphasize open innovation and sectoral targeting

10th Annual RE$EARCH MONEY Conference

Open innovation and an exploration of demand-side policies and programs were featured prominently in the 10th annual RE$EARCH MONEY Conference which brought together R&D policy makers, analysts and practitioners for a two-day discussion of the role of government research support in business innovation. A large roster of national and international speakers debated the pros and cons of direct and indirect support for business innovation and the evolving roles of policy makers and government labs in assisting firms in growing their businesses and competing in a global environment.

The conference marked the first time RE$EARCH MONEY has partnered with the National Research Council (NRC) — now under the leadership of John McDougall — one of Canada's most prominent organizations working at the intersection of government-business collaboration. McDougall provided a broad overview of his plans to move towards becoming a more "outcome-oriented and collaborative" organization while remaining cognizant of the NRC's storied history.

"Time has caught up to the NRC, perhaps passed us by on occasion … We've drifted away from our mandate," he said. "There's too much focus on discovery and too little demand-driven activity. To become a successful research technology organization (RTO) the work we do must be successfully deployed."

McDougall says it's critical to focus on results over activities, although he acknowledged that there's a "tendency to default to activities because they're easier to measure". More value will be realized by modifying NRC's direction and embracing the benefits of sharing and collaboration, taking knowledge from anywhere in the innovation system and feeding into programs.

NRC's new flagship programs are intended to contribute to that evolution, pushing decision-making upwards in the organization and demonstrating how NRC works and the value it brings to the public, and stakeholders. (R$, March 17 & May 2/11).

McDougall says one obstacle to change at NRC is the existing culture in which scientists find it easier to conduct self-directed research. The challenge is to affect a modification towards a more mission-oriented perspective, necessitating a change in the business model. He adds that NRC is in the final stages of working through all of its program areas — a process that should be complete by late summer — followed by a road show to try out the new approach in the marketplace.

"If we can make the transformation, we will have set the NRC on a new course for a few decades," says McDougall.

As the NRC evolves to become a true RTO, its activities will grow in complementarily to other RTOs across the country, which have banded together under the Innoventures Canada (I-CAN) umbrella.

Dr Laurier Schramm, president of the Saskatchewan Research Council, says RTO's work in the valley of death — the gap between promising ideas and marketable products — moves beyond R&D to activities that include engineering, testing and pilot and demonstration plants.

Prior to I-CAN, Canada's RTOs (previously called Provincial Research Organizations) worked largely in isolation, focused exclusively on their own jurisdictions.

"I-CAN changed that. There's now collective strength," says Schramm.

A regional initiative to use the combined strength of several RTOs is occurring in the Quebec City region. Led by the National Optics Institute (INO), the initiative brought together several regional RTOs for a one-day conference with industry. The result, says Christopher Deutsch, INO's VP operations, is a deeper appreciation of how researchers can assist smaller firms with their technological challenges as well as a growing demand from companies for the services RTOs provide.

"This will result in more R&D being done with SMEs," says Deutsch. "The ecosystem is changing quickly and open innovation tools are effective in addressing the needs of companies and markets to achieve better alignment."

From an industry perspective, several speakers outlined their views on what roles government should play in stimulating high-tech sectors and innovation. For many firms, highly qualified personnel (HQP), strategic support and a shift in cultural attitudes towards risk and entrepreneurial activity ranks among the most valuable contributions government can make.

"We do research with universities for talent and ideas, not for patentable ideas," says Tony Florio, a university relations manager with Research In Motion Ltd. "We also fund graduates to seed highly qualified personnel for RIM or part of its ecosystem. There's a significant amount of engagement required to tap into university expertise. It's even tougher for SMEs."

For MacDonald Dettwiler & Associates (MDA) the most significant role played by government is the provision of direct support, procurement and backing in the international marketplace.

Mag Iskander, president of MDA Information Systems, says the vision of the federal government in the 1980s was instrumental in establishing the environment for MDA's early success, with an investment of $100 million to build the first Canadarm. His assessment of government support today is far less complimentary.

"The procurement and contracting system in Canada is broken. It's not suited to a high-risk, high-tech industry like space," he says. "Canadian IP policy is unpredictable and unstable."

Dr Savvas Chamberlain, founder of DALSA Corp, identified another critical role that government can play — helping to enact a cultural shift among Canadians, especially the young. "In Canada, there's no shortage of research funding. We lack a cultural shift to get kids to believe in business innovation and become more sophisticated. We need to produce more entrepreneurs," says Chamberlain. "Graduates must be inter-disciplinary because all the single-discipline, low-hanging fruit is taken. It has to be social and technological innovation combined."

RIM's Florio concurs, arguing that much of technological innovation is an art in which design, ergonomics and engineering play critical roles. He notes that Toronto's OCAD Univ is very aggressive in pushing design education.

Canada is not alone in its struggle to craft an effective innovation policy that will boost industrial R&D. Policy makers from the UK and the Netherlands offered their perspectives on innovation efforts in their countries. Both acknowledge that commercialization of promising research remains a key obstacle and outlined dramatic changes in government policy being enacted to improve outcomes.

In the UK, the Technology Strategy Board (TSB) was created in 2008 to accelerate innovation by mounting commercialization projects and running networks and personnel exchanges. Focusing on health care, energy and low-carbon and digital environments, the TSB has been influenced by open innovation with an emphasis on collaboration, quality over quantity and the targeting of fast-growing SMEs.

"We reach out to those who plan to grow quickly," says Allyson Reed, TSB's director of enterprise and communications. "We need to focus help on new companies and keep it simple and tailored."

To that end, the UK's has dismantled its regional innovation infrastructure and is utilizing the TSB as its primary vehicle for accelerating innovation.

In the Netherlands — which shares many innovation traits with Canada — a change in government has brought a major shift in innovation policy from one modelled on the Finnish approach to the more hands-off style of Switzerland.

According to Arie van der Zwan, senior policy advisor on international affairs in the Netherlands Ministry of Economic Affairs, the new right-leaning coalition has introduced an innovation tax credit in which firms receive a 20% tax credit for revenues tied to innovation. At the same time, it has announced a 500-million-Euro reduction in R&D subsidies, a focus on nine industrial sub-sectors and a greater use of EU rather than Dutch instruments to manage risk.

"We have a problem attracting foreign high-tech companies and fiscal consolidation is putting pressure on R&D budgets," says van der Zwan. "The Swiss have no subsidies or tax credits and they encourage a high level of interaction between public research institutions and business."

Like Canada, the Netherlands performs well in the publication of scientific articles and patents but is weak in company creation. Public research is not well utilized and there is a lack of early-stage VC. The Netherlands has also broken with the EU on striving for a target of 3% R&D spending as a percentage of GDP. The new target is 2.5% from the current 1.8%, which is roughly the same as Canada — a level van der Zwan says is "more realistic".

Presentations from the R$ Conference can be found at www.researchmoneyinc.com.

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